Parting in Partnership: Selling Advice for Joint Owners
Closely held printing businesses are either sole proprietorships or partnerships. One model can be as successful as the other. It’s the quality of the leadership that counts, and a strong management vision is the same whether it comes from one person or is shared by a group.
Partners, however, will have a little more planning to do in order to be ready for the eventual sale of the company they jointly own and operate. They’ll need to understand each other’s personal objectives and, once they have that understanding, give themselves time to structure and execute a sale that satisfies everyone.
Dual, 50-50 partnerships are the most common, but it isn’t surprising to see printing businesses with three, four, and even five owners. The first question for multiple owners to answer is whether all the partners actually want to sell. If there are age differences among them, those closer to retirement may be more open to the idea than the younger members of the team. Some may need income from the business more than others. Although everyone has the company’s best interests at heart, personal interests may not be as closely aligned.
New Direction Partners advises clients who are joint owners to discuss these things among themselves regularly, at least once a year. This will clear the air about individual expectations. It also will enable the partners to anticipate and overcome obstacles to a sale. For example, in a situation where it’s clear that one partner doesn’t want to sell to outsiders, the answer may be for the other partners to buy his or her share out. This can be decided amicably and timed to happen at a moment that will be comfortable for everyone.
Correct valuation is a concern for every sale-minded owner, but for partners, there’s an added question: will the proceeds from a sale divided by the number of owners generate the amount of cash that each shareholder has in mind? If the answer is no, expectations may have to change. This is one reason why some joint owners sign written agreements about business valuation, typically at their annual meetings. They then review the estimates periodically and update them annually. This removes many questions in case of an unexpected need for one partner to sell, such as a death, divorce, or other urgent family need.
As far as buyers are concerned, a profitable partnership operating with this kind of harmony is no less desirable than a business with just one owner in charge. But, a buyer who detects disagreement or animosity among joint owners probably will move on — there are plenty of other candidates without headaches of that kind for purchasers to look at.
It’s always a shame to see unresolved issues between partners work to the detriment of a business. In one 50-50 situation, partner A didn’t want to sell, and partner B didn’t want to buy partner A out. This went on like an unhappy marriage for three or four years until the company finally closed its doors. The partners owned the building and were able to rent it to another business — better than nothing, but a poor substitute for the profitable sale that might have been possible had the owners found a way to reconcile their differences.
Qualified management advisement can help to keep print business partnerships strong. So can just being frank about what you, as a joint owner, see as a fair reward after years of working side by side with partners whose contributions you value as highly as they value yours. In that spirit, you’ll find an exit strategy that everyone can endorse.
James A. Russell, partner at New Direction Partners, brings over 20 years of experience as a printing company executive having served as CEO of two family-owned graphic communication companies. During his tenure as owner and CEO of Arbor Press, a commercial printing company in Michigan, the company was an eight-time winner of the National Association for Printing Leadership’s (NAPL) prestigious Management Plus Awards program. Arbor Press was also recognized twice during his leadership as one of the 50 fastest growing printers in the country. Contact him at (610) 230-0635, ext. 703.